Decarbonization and its Impact on Communities

Environmental, Social, and Governance (ESG) factors are becoming increasingly important in Canadian real estate for occupiers, tenants, managers, and investors. There is a growing demand and regulatory pressure for disclosure of building performance, physical climate risk, and social impacts like physical accessibility and inclusion at both the building and portfolio level.

B Corp framework to integrate ESG goals into real estate business strategy

ESG can be incorporated into any business operations and marketing context by measuring current performance and identifying actionable activities to progress towards more sustainable practices. One effective framework for integrating ESG goals into business strategy is the B Corp certification process.

B Corp, which stands for “Benefit Corporation,” combines social and environmental best practices with a rating system. Notable B Corps include Patagonia, Business Development Bank of Canada, and Bullfrog Power.

ESG value propositions in real estate: Evaluate, categorize, explore, decide

In the Canadian real estate sector, ESG-based value propositions can help differentiate businesses and create tangible benefits for the communities they operate in. Many Realtors are community leaders, engaging in activities such as sponsoring local sports teams, contributing to community fundraising, and supporting local groups through volunteerism.

By measuring current community contributions, categorizing them into Environmental, Social, and Governance aspects, and determining how to incorporate these contributions into the value proposition and marketing strategy, real estate practitioners can align with ESG principles.

Competitive advantages in the industry

ESG considerations offer competitive advantages in the real estate market, as highlighted by Philippe Bernier, Executive Vice President of Strategy and Growth at JLL Canada. Decarbonized buildings are in high demand, providing benefits such as attracting quality tenants, increasing bid depth, and enhancing liquidity during sales transactions.

Global demand for low-carbon buildings in Canadian markets

ESG measurement in buildings focuses on energy efficiency, operational carbon emissions, and embodied carbon from material selection, along with considerations for physical climate risks. JLL Research indicates a global supply gap of low-carbon buildings, particularly in Canadian markets like Toronto and Vancouver.

For instance, Toronto’s top occupiers are committed to carbon reduction targets, yet a significant portion of demand may go unmet by 2030 without accelerated retrofitting and construction of low-carbon buildings. This gap underscores the need for more sustainable commercial spaces.

Key value proposition: Educating clients on energy efficiency, carbon emissions, and decarbonization potential

Real estate practitioners can add value by helping clients understand their property’s energy efficiency, carbon emissions, and potential for decarbonization. By implementing strategies to reduce carbon emissions, owners can enhance the value of their assets through lower costs and reduced risks.